New Year celebration time it may be. However, for many investors it is also a period of sober rumination. How did we not pick the high-flying trusts of the past year?
It is little consolation that the stock market overall had a good year. The FTSE-100 kicked off last January at around 6,000. It is now at 6,750, a gain of 12 per cent. Add in dividend income and the overall gain it is nearer 14 per cent. Such a return is surely one to be envied. Instead, we eat ourselves up that we did not pick the high fliers.
A major reason is that most investment trust commentators at this time – yours truly included – tend to confine their attention to the bigger, better known companies and those offering easy access through ISA and regular savings plans. The more esoteric specialist trusts – those exotic birds of paradise – tend to be screened out (though not, I regret, the turkeys). This gives the impression that investment trusts really are of little appeal to the more adventurous investor.
Yet out of a total of 405 investment trusts, 171 have risen in value by 20 per cent and more over the past 12 months and 44 have risen by more than 50 per cent. To get into the top ten list, your investment trust choice would have to have risen by more than 75 per cent.
It is hard to accuse the top end of the sector of being dull or lacking in choice. The best-performing trust of the past year has been Alpha UK Multi Property Trust, with a spectacular gain of 355 per cent. Powerhouse Energy Group pounded in with a rise of 211 per cent. Metro Baltic Horizon Trust comes in third with a rise of 142 per cent, followed by China Growth Opportunities Trust, up 92.3 per cent.
If none of these took your fancy, Ukraine Opportunity Trust would have rewarded your attention with an 88 per cent gain. Better known but only variably admired is 3i Investment Trust, galloping into sixth place with a rise of 83 per cent, just pipping Macau Property Opportunities, up 82.6 per cent. Looking at the range of specialisms on offer as well as the performance, who can say investment trusts lack excitement?
But for the past four years the focus has been on defensive, income-orientated trusts after the trauma of the 2008-09 financial crisis. The birds of paradise rarely featured as investors opted for more mainstream, familiar names. But while investors may have missed out on the more breathtaking rises, many will still have done well.
Baillie Gifford Japan Trust is romping to the 2013 finishing line with a gain of 78 per cent – a wait, admittedly, for long-term holders of Japan.
Not far behind in ninth place is Henderson Opportunities Trust with a gain of 76.4 per cent. More impressive for investors is the 406 per cent rise this £83 million trust has achieved over five years. What is particularly refreshing given its rather anodyne aim – “to provide shareholders with a higher than average growth of capital over the medium to long term from a portfolio of predominantly UK companies” – is the eclectic mix of its top ten holdings. It has avoided FTSE 100 choices in favour of Retroscreen Virology, IT, XP Power, Hyder Consultancy and Senior Group.
When it comes to ideas for 2014, it is to the other end of the performance tables that I look. There, the full horror of 2013 for mining and precious metals investors is laid bare. Golden Prospect Precious Metals (heavily into silver, gold and platinum) lost almost 60 per cent of its value (though not as crushing as Invista European Real Estate, down by 83.5 per cent).
The most widely held trust in this sector – the £965m BlackRock World Mining Trust – suffered a fall of just over 20 per cent. But standing today on a yield of 4.6 per cent and on a discount to net assets of 5.7 per cent, it has appeal as a potential recovery story over the next year.
Emerging markets have also been a big disappointment over 2013, with the iconic Templeton Emerging Markets down by 9.5 per cent, and City Natural Resources High Yield Trust down by 38.5 per cent. However, on a yield of 4.5 per cent and a discount to net assets of 13.9 per cent they offer attractions for the brave. Commodity funds also struggled. But Premier Energy & Water, an old favourite but a long-time “dog”, had a much better year, with a gain of 69 per cent. On a yield of 5.4 per cent and still on a discount to net assets, albeit small, I believe it should have further to go in 2014.
Another good 2013 performer still offering value is the JP Morgan Mid Cap Investment Trust. This £228m fund has demonstrated good stock-picking of late and should continue to benefit from the economic upswing.
I believe the Japan recovery story will continue and I would thus include Witan Pacific Investment Trust or Martin Currie Pacific, Witan having the higher exposure to Japan. Both trusts are standing on discounts of more than 10 per cent, with Martin Currie offering the higher yield (3.2 per cent).
Finally, I would include Standard Life European Private Equity for 2014. While it gained a well above average 24 per cent over the past 12 months it should have further to go. The 2.5 per cent yield and 13.8 per cent discount to net assets gives some solid under-pinning.